question_answer

From the following information, calculate cash flow from investing activities.

Particulars	Closing (Rs.)	Opening (Rs.)
Machinery (At cost)	8,40,000	8,00,000
Accumulated Depreciation	2,20,000	2,00,000
Patents	3,20,000	5,60,000

Additional Information

(i) During the year, a machine costing Rs.  80,000, accumulated depreciation Rs. 48,000 was sold for Rs. 40,000.

(ii) Patents were written-off to the extent of Rs. 80,000 and some patents were sold at a profit of Rs. 40,000.

Answer:

                                                Cash Flow from Investing Activities

Particulars	Amt (Rs.)
Proceeds from Sale of Machinery	40,000
Payment on Purchase of Machinery (WN 1)	(1,20,000)
Proceeds from Sale of Patents (WN 3)	2,00,000
Cash Flow from Investing Activities	1,20,000

Working Notes Dr                                                                     Machinery Account                                                      Cr

Particulars	Amt (Rs.)	Particulars	Amt (Rs.)
To Balance b/d	8,00,000	By Bank A/c (Sale of Machinery)	40,000
To Profit on Sale of Machinery A/c	8,000	By Accumulated Depreciation A/c	48,000
(Statement of profit and loss)		(Depreciation on machinery Sold)
To Bank A/c (Purchases)	1,20,000	By Balance c/d	8,40,000
(Balancing figure)
	9,28,000		9,28,000

Profit on Sale = Sale Price - Book Value of Machinery =Rs. 40,000 ?Rs. 32,000 (80,000 - 48,000 =Rs. 8,000 2. Dr                                                     Accumulated Depreciation Account                                        Cr

Particulars	Amt (Rs.)	Particulars	Amt (Rs.)
To Machinery A/c	48,000	By Balance b/d	2,00,000
(Depreciation on machinery sold)		By Depreciation A/c (Statement of Profit and loss) (Balancing figure)	68,000
To Balance c/d	2,20,000
	2,68,000		2,68,000

3 Dr                                                                  Patents Account                                                          Cr

Particulars	Amt (Rs.)	Particulars	Amt (Rs.)
To Balance b/d	5,60,000	By Bank A/c (Sale) (Balancing figure)	2,00,000
To Profit on Sale of Patents A/c	40,000	By Amortisation A/c (Statement of Profit and loss)	80,000
(Statement of profit and loss)		By Balance c/d	3,20,000
(Given)
	6,00,000		6,00,000